For many years, marketers have been collecting information on their customers and using this information to identify trends and group customers by their likenesses. This process helps marketers to better understand the composition of their customer base and create more effective marketing campaigns.
However, like most every business process these days, marketing has evolved to be much more data-driven. Additionally, marketing teams have had to evolve their strategies to match the changing ways consumers are interacting with the businesses they shop with. Today, that means a greater focus on digital channels – websites, mobile apps, email, social media – as more and more consumers utilize them as part of their personal buyer’s journey.
What marketers are beginning to discover is that, despite the fact that consumers now need to be reached on more channels than ever before, this burgeoning digital landscape has actually made it easier to understand and effectively engage their customers. The reason being that an abundance of actionable customer data can be extracted from these channels and used to create more nuanced marketing campaigns.
But simply possessing more customer data won’t make your marketing more effective. What does make it more effective, however, is customer data segmentation.
Read on to learn the important role customer data segmentation plays in modern data-driven marketing, what you need to do before you begin the process, and why truly personalized marketing is only possible with customer data segmentation.
The purpose of customer data segmentation is to identify similar characteristics among your customers and subsequently divide them into groups to reflect these commonalities. Once separated into these various groups, marketers can then engage customers with personalized and relevant messages and offers that connect with each one of their specific customers (see more on the impact of customer data segmentation on personalized marketing below).
The end result and major benefit of customer data segmentation is a substantially better understanding of the habits, tendencies, and wants of your customers on both an individual and large-scale level. Additionally, it can help you to identify your high-value customers as well as those that need additional nurturing (or that aren’t worth investing further resources into). Ultimately, this translates into a more strategic approach to your marketing outreach and help to improve customer retention, increase customer lifetime value, and increase sales.
In order to gain meaningful insights from your customer data segmentation initiatives, there are a few critical items that must be addressed before you begin.
First, you must ensure that you’ve identified all your various sources of customer data and compiled this data in an organized manner. Because modern marketing now requires a cross-channel approach, many marketing teams now have an increasingly large number of tools, and consequently, data sources in their technology stacks. This large number of data sources can make it seem overwhelming to find and manage all your customer information. Luckily for marketers, a number of technologies are available to aid them with their customer data needs.
There is, however, one technology that stands out from the pack when it comes to customer data collection and management: the customer data platform (CDP). CDPs are designed to integrate with existing systems in your MarTech stack and provide you with a singular location for collecting all your customer data, storing it, analyzing it, and segmenting it. And because CDPs are built with marketers in-mind, they require virtually no IT oversight to maintain. They are an invaluable tool that all data-driven multichannel marketers should consider adding to their arsenals.
Regardless of the technology you choose to manage your data, the most important thing is that all your cross-channel data be located in one place and be trustworthy. What does “trustworthy” mean exactly? It means your data must be free of duplicate records, outdated information, incorrect information, and incomplete fields. All of these can wreak havoc on the success of your eventual customer data segmentation strategy.
The second item that must be settled before you begin segmenting your customer data is to set a well-defined goal for what you want to get out of your segmentation efforts. Once you feel that all your data is accurate and trustworthy, that’s when you can go about putting together a strategy for what you want to achieve with your customer segmentation.
Goals such as “Better personalization” or “More specific targeting” are simply too broad and won’t cut it. Rather, think in terms of specific value-adding business outcomes, such as reducing shopping cart abandonment, increasing average order value, increasing in-store traffic, or improving email clickthrough rates. Once you have your specific goals in place, that’s when you should begin to identify the customer segments you wish to target and ultimately market to.
Customer data segmentation isn’t a one-size-fits-all process, meaning that there is no absolute right or wrong way for marketers to go about dividing and grouping your customer base. This means that you have the freedom and flexibility to segment your customers according to your business’ needs and goals both present and future. As all marketers know, expectations and business goals are constantly changing, and the ability to quickly pivot the focus and messaging of your marketing campaigns is critical to the success of these campaigns.
Again, while there is no right or wrong way to segment your customer data, there are likely to be certain data sources that will be foundational components of your customer segmentation strategies than others. (And no that’s not a typo – it’s much more likely you’ll have multiple customer data segmentation strategies, possibly even within the same campaign.) These data points will likely fall into one of four customer segmentation categories:
The data you use in your customer segmentation strategy is entirely dependent on the goals you establish at the onset of your campaign as well as the breadth and availability of your customer data. It could be as basic as age or gender, or as detailed as the amount of money spent as the result of the last promotional email you sent along. How specific you want to get with your customer data segmentation is completely up to you.
Just remember, even if your segmentation efforts start off in a more basic manner, it’s likely you’ll want to expand them in the future. This is why collecting as much detailed customer data as you can and maintaining a trustworthy database is essential.
There are several reasons why customer data segmentation has become critical for success in the marketing world today.
Far and away the most important reason customer data segmentation has become a must-do part of a modern marketing strategy is that it aids in the creation and targeted distribution of marketing collateral to the various groups of your customers. With your customers segmented based on the factors of your choosing (for example, average order value or geographic location), you can then create specific marketing outreach based on those segments.
This gives you the ability to send the customers in each of your designated segments tailored messaging that appeals to them based on their previous interactions with you. This tailored messaging will better resonate with your customers and has been shown to improve conversion rates for your marketing outreach.
In addition to better customer targeting, customer data segmentation helps you reach your customers on their preferred communications channels. Today’s consumers interact with the brands and businesses they shop with on more marketing channels than ever, which include:
Given the number of marketing channels available to consumers, brands need to take a multichannel approach to their campaigns. Without a firm understanding of what channel(s) your customers prefer to use, you’re basically just throwing things at the wall and hoping they stick. But by segmenting your customers based on the channels they’re most active on, you increase the likelihood of connecting with them in a way they welcome.
This type of segmentation would rely most heavily on behavioral data you collect on your customers: website visits, email opens and clickthrough rates, social media post engagements, special in-store or online coupon/promotional offer usage, and more. Additionally, you could always engage with them directly via a survey or poll to learn
With today’s consumer potentially exposed to upwards of 5,000 ads per day, it’s clear that cutting through all the noise is vital to business success, and customer segmentation is the best way to create marketing programs that stand out.
Personalization. It’s been a buzzword in the marketing world for years now, but despite its increasingly widespread use by marketers it can still be interpreted and executed in a million different ways. However, it’s become clear that the brands that fully activate their customer data into its marketing programs are the ones that can create standout personalization strategies.
Personalized marketing is the key to a better, more lasting connection with both longtime customers and those who have just started shopping with your business. However, we’ve seen basic personalization become more commonplace over the past five years. A brand having your name at the beginning of an email may have stood out a decade ago, but today, your buyers expect that you have their name and that you’re going to use it in your marketing. This is where it becomes critical to go beyond “basic” personalization in your outreach.
A recent Accenture study found that 91% of consumers say they’re more likely to shop with brands that “recognize, remember, and provide [them] relevant offers and recommendations,” while research from Salesforce found that 70% of customers say that engagements based on previous interactions are important to winning their business. It’s clear that consumers want it, so now it’s up to you as the marketer to deliver. And the key to delivering truly personalized, relevant messaging and content to your customers lies in customer data segmentation.
By segmenting your customer data, for example, identifying customers who have made two or more purchases of $50 or more in the last two months, you’ve now found a much more focused group of customers to provide personalized messages and offers to. In this example, personalized outreach might be an exclusive offer for 20% off their next purchase of $50 or more. Although the consumer may not always recognize this as a personalized message, you are providing them with a special offer that is based on their behavior. This simultaneously rewards these customers for their business while encouraging them to continue engaging with your brand and making purchases. The more they interact, the more your brand learns about their interests, and so this virtuous cycle continues.
And this is just the beginning: the more in-depth your customer data segmentation is, the more personalized and impactful your outreach can be. This again highlights the importance of collecting detailed customer data and aggregating this data to create trustworthy customer records.
Hopefully we’ve provided you with a clearer understanding of the value that customer data segmentation can provide your organization. While we’ve mostly discussed the value that performing customer data segmentation provides marketers, the use of customer data isn’t just for marketers. it can also have a meaningful impact on various other areas of your organization in both B2B and B2C environments. Sales teams would always welcome a greater understanding of your customer base to inform their outreach and selling tactics. Finance teams will benefit from more knowledge on customer preferences and can use it to better allocate resources and better inform future projections. The same goes for Customer Service teams, which could use it to better understand any hotspots for customer frustrations.
The bottom line is that when properly planned and carried out, customer data segmentation can benefit your entire organization well beyond just marketing. To be clear, it’s not the only thing that separates a successful business from an unsuccessful one. But, a better understanding of what does and doesn’t drive your customers to engage with and purchase from your organization is an invaluable piece of business intelligence that can give you a serious advantage.
Request a demo and learn how QuickPivot can help your retail business:
"With QuickPivot’s segmentation capabilities, we can easily and quickly create targeted email lists that utilize specific data attributes and defined Persona segments. This allows us to test content options within these targeted segments and better understand who is engaging with our content."
Lauren Wright Senior Manager, CRM at Allen Edmonds